Both candidates claimed victory in Indonesia's presidential election on Wednesday, suggesting there could be a drawn out constitutional battle to decide who will next lead the world's third-largest democracy.

Just a few hours after voting closed, Jakarta governor Joko "Jokowi" Widodo said he had won, based on quick counts of more than 90 percent of the votes. A victory for him would be seen as a triumph for a new breed of politician that has emerged in Southeast Asia's biggest economy, and increase the promise of desperately needed reform in government.

But ex-general Prabowo Subianto, the rival candidate viewed as representative of the old guard that flourished under decades of autocratic rule, said other, unnamed, quick counts of votes favoured him.

Jokowi, on other hand, named tallies by six pollsters, most regarded as reliable and independent. The included three respected, non-partisan agencies - CSIS, Kompas and Saifulmujani - which provided accurate tallies in the April parliamentary election.

The quick counts are conducted by private agencies which collate actual vote tallies as they come out of each district. The results however are unofficial: the Election Commission will take about two weeks to make an official announcement and the new president is not due to take office until Oct. 1.

"There are many quick counts from various survey agencies. But...the one that will be valid according to law in the end will be the verdict of the KPU (Election Commission)," Prabowo told a talk-show on a television channel.

A senior aide to Jokowi said the party would not take any action like naming a cabinet until the official result is announced on or around July 22. "We've waited months. We can wait another 2 to 3 weeks for the (Election Commission's) final verdict," Luhut Panjaitan told Reuters.

The standoff is unprecedented in Indonesia, a member of the G-20 group of nations that is holding only its third direct presidential election. In both the previous elections, Susilo Bambang Yudhoyono, now the outgoing president, won by a clear margin. There have been concerns of violence once the result is known, a worry alluded to by Yudhoyono's administration.

"For both groups of supporters related with the split quick count results, we request they do not mobilise their supporters excessively," said Djoko Suyanto, coordinating minister for legal, political and security affairs.

There were no reports of any major violence. Around 250,000 police officers were on standby across Indonesia, authorities said.

CLAIM AND COUNTER-CLAIM

It has been the dirtiest and most confrontational campaign in memory in a country which traditionally holds up the value of consensus politics.

Ahead of the vote, the two candidates had been neck and neck in opinion polls as Jokowi lost a huge early lead in the face of smear campaigns and a far more focused, and expensive, race for the presidency by his rival.

"Today the people have decided a new direction for Indonesia ... This is a new chapter for Indonesia," Jokowi told hundreds of supporters at Proclamation Square, where the country's first president Sukarno declared independence in 1945.

At the same time, Jokowi offered conciliatory words to his rival, Prabowo, saying he was a patriot and contributed to a better democracy.

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Prabowo countered with his own declaration of victory.

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"(The quick counts) show that we, Prabowo-Hatta, have received the support and mandate from the people of Indonesia," he told a rally in the capital, referring to his running mate Hatta Rajasa.

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After the official result is declared, candidates can challenge the results in the Constitutional Court, the final arbiter over contested polls.

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The Court's reputation has been badly tarnished after its chief was sentenced to jail for life this month for corruption.

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"There have always been challenges...So we could end up with delayed certainty for a few weeks," Douglas Ramage, a Jakarta-based political analyst told Reuters.

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The government declared Wednesday a public holiday and markets were closed although the rupiah currency hit a seven-week high against the dollar in offshore markets on Jokowi's victory claim.

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His clean image is seen likely to bring in more foreign investment as he seeks to correct Indonesia's reputation of widespread corruption.

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But any euphoria in the market could quickly evaporate if the stalemate over the result is not quickly resolved or if there is violence.

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"Whether the market goes up or down tomorrow will mostly depend on the security. For me, maintaining security is very important at this point," said Isbono Putro, a director at BNI Asset Management, who helps manage about 8 trillion rupiah ($688.47 million) in assets.

Dubai airline Emirates [EMIRA.UL] finalized a $56 billion order to buy 150 Boeing ( id="symbol_BA.N_0">BA.N) 777X jets on Wednesday, firming up a commitment made last year, just weeks after scrapping an order with rival planemaker Airbus ( id="symbol_AIR.PAAIR.PA).

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The deal includes purchase rights for an additional 50 airplanes which, if exercised, could increase the value to about $75 billion at list prices, Boeing said in a statement.

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"With the order for 150 777Xs, Emirates now has 208 Boeing 777s pending delivery, creating and securing jobs across the supply chain," Emirates president Tim Clark said.

The agreement comes days before the Farnborough International Airshow, traditionally an event at which billions of dollars of new plane orders are announced.

It follows the surprise cancellation in June of a $16-billion order by Emirates to buy 70 of Airbus' A350 aircraft, which delivered a blow to the European planemaker's newest aircraft and hit its share price.

Airbus ended the first half of the year behind its U.S. rival in orders and deliveries, but is widely expected to unveil hundreds of new orders at the Farnborough show next week.

The Emirates' order was part of the 777X launch at the Dubai Air Show in November last year, one of the largest product launches in commercial jetliner history. Along with Emirates, Gulf carriers Etihad Airways and Qatar Airways also announced deals for the plane, totaling $100 billion at list prices.

Emirates, which is the world's largest operator of the Boeing 777 jet, was close to finalizing the order, Reuters reported last week.

Emirates and Qatar Airways, which also ordered 50 777X jets, had jointly negotiated the deal at the Dubai Air Show. However, it was not clear whether the Doha airline had finalised its order yet.

Qatar Airways could not be immediately reached for a comment.

Emirates and Qatar Airways are part of a trio of Gulf carriers, alongside Abu Dhabi's Etihad, that have secured large fleets of widebody jets to support the growth of new hubs.

The 777X is the latest version of Boeing's best-selling widebody jet, a so-called mini-jumbo, which carries a list price of up to $320 million.

The current versions are capable of seating up to 550 passengers in a single-class configuration, according to Boeing. In a more typical three-class configuration, the jet family seats up to 386 passengers and has a range of up to 9,395 nautical miles.

Britain's top share index fell for a third straight session to a two-month low on Wednesday, with car insurer Admiral sinking after a downbeat trading update.

Admiral slumped 5.3 percent, making it the top decliner on the blue-chip FTSE 100 index, after saying revenues fell in the first half of the year and there was no firm evidence of a return to growth in UK car insurance premiums.

The company said it planned to launch its first ever bond of up to 200 million pounds ($340 million) to diversify its capital base and help prepare to meet Solvency II regulations in 2016.

Oriel Securities repeated its "sell" rating on the stock, while Berenberg said a likely fall in margins was not reflected in current consensus earnings forecasts.

"The market will be surprised that Admiral sees a need to raise debt. With the company forecasting falling margins and showing falling turnover, we believe these earnings forecasts will have to come down," Berenberg analyst Peter Eliot said.

Admiral's trading volume was more than three times of its 90-day daily average, while trading on the FTSE 100 index was about half its 90-day average in late afternoon trading.

Aviva was another big casualty, off 2.9 percent. It aims to double the amount of excess cash it generates during the next stage of a turnaround plan, but its shares fell on worries the plan did not go far enough.

The FTSE 100 index was down 0.4 percent at 6,714.03 points by 1419 GMT, having suffered its biggest one-day percentage fall since March on Tuesday, when it fell 1.25 percent.

"It feels like there's really negative sentiment; people are worried about earnings ... I think we'll see a couple of days of selling," Joe Rundle, head of trading at ETX Capital, said.

However, airlines, which slid on Tuesday following a profit warning from Air France-KLM, recovered some ground as traders deemed the weakness to be overdone.

EasyJet climbed 2.9 percent to top the FTSE 100 leader board, while British Airways owner International Consolidated Airlines Group rose 1.3 percent.

Investors' focus has shifted to the second-quarter earnings season for hints about the market's direction in the near term.

While U.S. aluminium giant Alcoa kicked off the reporting season with quarterly results that beat analysts' expectations, investors were doubtful that would be enough to give a big fillip to the FTSE, hovering around multi-year highs.

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"The stock market has become vulnerable to more corrections, particularly ahead of the reporting season and at a time when volumes are going to be thin due to summer holidays," Peter Dixon, equity strategist at Commerzbank, said.

"You don't want to be too exposed in that kind of environment."

Also weighing on the FTSE 100 were stocks trading without the attraction of their latest dividend, namely Coca-Cola HBC AG and Next. They knocked 1.06 points off the index. (Reporting by Atul Prakash; Editing by Robin Pomeroy)

American Airlines Group Inc and Southwest Airlines Co forecast growth in an important revenue measure for the second quarter, signaling that demand for air travel is solid during the summer.

Unit revenue, also known as passenger revenue per available seat mile, is expected to grow between 5.5 percent and 6.5 percent in the second quarter at American, while Southwest forecast a rise of more than 8 percent. Unit revenue is a gauge of how full planes are and of pricing power.

Demand "is as strong as ever," said Bob McAdoo, an airline analyst with investment bank Imperial Capital, who said American gave a stronger-than-expected outlook and that Southwest revenue results were up "meaningfully."

Recent profit warnings from European airlines such as Air France-KLM and Lufthansa had raised concern about demand trends, pummeling share prices.

Last week, Delta Air Lines said unit revenue for June grew less than it had forecast, citing lower business demand for travel to Latin America during the World Cup soccer tournament and capacity increases that hurt ticket prices. Delta forecast a rise of 6 percent in its second quarter unit revenue.

McAdoo said the European carriers faced issues that did not affect U.S. airlines as much, such as heavier competition from low-cost rivals.

The second quarter is typically a strong period for airlines because it includes some vacation travel.

American Airlines, formed in the December 2013 merger of AMR Corp and US Airways Group, said it could take charges of up to $630 million in the period. It cited a charge of about $330 million tied to the sale of its portfolio of fuel-hedge contracts and an added $250 million to $300 million in charges related to its merger and other items.

Shares of U.S. airlines were mostly higher in morning trading, with American Airlines up 1.9 percent at $41.01 and Southwest up 2.1 percent at $27.26. Delta was up 1.5 percent at $36.98, and United Continental was off 0.1 percent at $39.50. (Reporting by Karen Jacobs in Atlanta; Editing by Bernadette Baum and Jonathan Oatis)

Britain's top share index fell for a third straight session to a two-month low on Wednesday, with Admiral sinking after a downbeat trading update and Aviva slipping after outlining its turnaround targets.

Car insurer Admiral slumped 3.3 percent after saying revenues fell in the first half of the year and there was no firm evidence of a return to growth in UK car insurance premiums.

The company said it planned to launch its first ever bond of up to 200 million pounds ($340 million) to diversify its capital base and help prepare to meet Solvency II regulations in 2016.

Oriel Securities repeated its "sell" rating on the stock, while Berenberg said a likely fall in margins was not reflected in current consensus earnings forecasts.

"The market will be surprised that Admiral sees a need to raise debt. With the company forecasting falling margins and showing falling turnover, we believe these earnings forecasts will have to come down," Berenberg analyst Peter Eliot said.

Admiral's trading volume was more than four times of its 90-day daily average, while trading on the FTSE 100 index was near 80 percent of its 90-day average.

Aviva was another big casualty, off 3.6 percent. The UK insurer aims to double the amount of excess cash it generates during the next stage of a turnaround plan, but its shares fell on worries the plan did not go far enough.

The FTSE 100 index closed 0.3 percent lower at 6,718.04 points after climbing to a high of 6,740.82 points earlier in the session. It suffered its biggest one-day percentage fall since March on Tuesday, when it fell 1.25 percent.

"It feels like there's really negative sentiment; people are worried about earnings ... I think we'll see a couple of days of selling," Joe Rundle, head of trading at ETX Capital, said.

However, airlines, which slid on Tuesday following a profit warning from Air France-KLM, recovered some ground as traders deemed the weakness to be overdone.

EasyJet climbed 3.1 percent to top the FTSE 100 leader board, while British Airways owner International Consolidated Airlines Group rose 1.2 percent.

Investors' focus has shifted to the second-quarter earnings season for hints about the market's direction in the near term.

While U.S. aluminium giant Alcoa kicked off the reporting season with quarterly results that beat analysts' expectations, investors were doubtful that would be enough to give a big fillip to the FTSE, hovering around multi-year highs.

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"The stock market has become vulnerable to more corrections, particularly ahead of the reporting season and at a time when volumes are going to be thin due to summer holidays," Peter Dixon, equity strategist at Commerzbank, said.

"You don't want to be too exposed in that kind of environment."

Also weighing on the FTSE 100 were stocks trading without the attraction of their latest dividend, namely Coca-Cola HBC AG and Next. They knocked 1.06 points off the index. (Reporting by Atul Prakash; Editing by Robin Pomeroy)

Former U.S. intelligence contractor Edward Snowden has asked Moscow to extend his asylum in Russia, his lawyer said on Wednesday.

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Russia granted Snowden a one-year visa in August 2013 despite the United States wanting Moscow to send him home to face criminal charges, including espionage, for disclosing secret U.S Internet and telephone surveillance programs.

"We have carried out the procedure of getting temporary asylum. It expires on July 31," Interfax news agency quoted Snowden's Russian lawyer, Anatoly Kucherena, as saying.

"Correspondingly, we have filed documents to extend his stay on the territory of Russia."

Kucherena could not immediately be reached for comment independently and the Russian Federal Migration Service declined comment.

Another lawyer for Snowden, whose precise whereabouts are a secret, said last month he expected Russia to extend the American's asylum beyond July.

President Vladimir Putin's refusal to return Snowden to the United States is one of many irritants in relations between Moscow and Washington, which are also as loggerheads over the conflicts in Syria and Ukraine, human rights and defense issues.

Iraqi security forces found 53 corpses, blindfolded and handcuffed, south of Baghdad on Wednesday as Shi'ite and Kurdish leaders traded accusations over an Islamist insurgency raging in the country's Sunni provinces.

Officials said dozens of bodies were discovered near the mainly Shi'ite Muslim village of Khamissiya, with bullets to the chest and head, the latest mass killing since Sunni insurgents swept through northern Iraq.

"Fifty-three unidentified corpses were found, all of them blindfolded and handcuffed," Sadeq Madloul, governor of the mainly Shi'ite southern province of Babil, told reporters.

He said the victims appeared to have been killed overnight after being brought by car to an area near the main highway running from Baghdad to the southern provinces, about 25 km (15 miles) southeast of the city of Hilla.

The identity and sectarian affiliation of the dead people was not immediately clear, he said.

Sunni militants have been carrying out attacks around the southern rim of Baghdad since spring. In response, Shi'ite militias have been active in rural districts of Baghdad, abducting Sunnis they suspect of terrorism, many of whom later turn up dead.

The tit-for-tat attacks have escalated dramatically since Sunni Islamist fighters seized control of large parts of northern and western Iraq last month, sweeping towards Baghdad in the most serious challenge to the Shi'ite-led government of Prime Minister Nuri al-Maliki since the withdrawal of U.S. forces in 2011.

Mass killings of scores of victims have become a regular occurrence in Iraq for the first time since the worst days of sectarian and ethnic cleansing in 2006-2007.

The Sunni insurgents, led by the group known as the Islamic State which considers all Shi'ites heretics who must repent or die, boasted of killing hundreds of captive Shi'ite army troops after capturing the city of Tikrit on June 12. They put footage on the Internet of their fighters shooting prisoners.

In the following weeks more than 100 Sunni prisoners died in two mass killings while in government custody. The Shi'ite-led government officially says they were killed in crossfire when their guards came under attack, first in a jail in Baquba north of Baghdad and then in a convoy moving prisoners from Hilla. Sunni leaders say the prisoners were executed by their guards.

Amnesty International and the United Nations have reported several other suspected incidents of mass killings of prisoners in government custody.

The fighting between the Islamic State, formerly known as the Islamic State in Iraq and the Levant, backed by other armed Sunni groups, and the army backed by Shi'ite militias, threatens to split the country.

The renewed sectarian war has brought violence to levels unseen since the very worst few months of the fighting that followed the U.S. invasion to topple Saddam Hussein in 2003.

Abductions have also increased. On Friday, 17 Sunni Muslims were taken from the Musayyib area and briefly held by security forces and Shi'ite militia, a local tribal leader said, while a prominent sheikh was also kidnapped by unidentified men.

BARZANI FLAYS MALIKI

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Sunnis have backed the Islamic State's offensive because of the widespread view that they have been oppressed under Maliki's government.

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The United States and other countries have called for politicians to set up a more inclusive government in Baghdad following a parliamentary election in April. But the new legislature has so far failed to agree on leadership for the country, leaving Maliki in power as a caretaker.

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Sunnis and Kurds demand he leave office, but he shows no sign of agreeing to step aside. The Kurds are now closer than ever to abandoning Iraq altogether, with Massoud Barzani, leader of their autonomous region, calling last week for his parliament to ready a referendum on independence.

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In a statement late on Tuesday, Barzani launched a withering attack on Maliki, saying his eight years in office had brought disaster to Iraq and set the stage for its latest conflict.

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Kurdish forces have exploited the turmoil to seize control of the city of Kirkuk and its huge oil reserves a month ago, achieving a long-held dream. They regard the city, just outside their autonomous region, as their historical capital, while its oil could provide ample revenue for an independent state.

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"We have said we are not prepared under any circumstances to accept for our will to be bent, and go back to square one and face what reminds us of the policies that drowned Kurdistan in seas of the blood of its civilians and turned their homeland to ruins and mass graves," Barzani said, referring to years of oppression under Saddam.

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"That is what we have clearly faced throughout the period of abuse of power during the two disappointing terms of the prime minister."

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Maliki hit back in a weekly address on Wednesday, accusing Kurds of allowing their provincial capital Arbil to become a haven for the Islamic State and other militants, including former members of Saddam's now-banned Baath Party.

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"We will never be silent about Arbil becoming a base for the operations of the Islamic State and Baathists and al Qaeda and the terrorists," he said.

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Many Sunni Muslims who fled the mostly Sunni northern city of Mosul during the militants' offensive have ended up in Arbil.

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Medical sources and eyewitnesses said seven people were killed and 18 wounded in an air raid on Mosul on Wednesday.

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In Falluja, in the mainly Sunni western Anbar province that borders Syria, the general hospital said nine civilians died and 44 were wounded on Wednesday from aerial shelling and what residents call "barrel bombs". In fighting northeast of Baghdad, militants took control of the town of Sudor as well as a local dam in fighting which killed four soldiers and wounded six others, a source at the local al-Zahra hospital said.

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Sudor lies in Diyala province about 90 km (55 miles) from the capital, another area where the army and Shi'ite militias have clashed with the Sunni insurgents, with both sides gaining and losing territory.

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Also in Diyala, nine soldiers were killed and 38 were wounded as they repulsed an attack by the Islamic State fighters on the Mansuriya military base on Wednesday, police and hospital sources said.

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In the Zaiyouna district of eastern Baghdad, gunmen stormed the house of a government official, beheading his son and shooting dead his wife, a security source and a source in the Baghdad morgue said.

Struggling apparel and accessories retailer American Apparel Inc said on Wednesday it has reached a deal with hedge fund Standard General LP and founder Dov Charney to remake its board and bolster its finances.

As part of the deal, American Apparel gave Standard General, three seats on its seven-member and received a $25 million loan from the shareholder, which could help it tide over a rough financial patch.

The retailer said five of its board members, including Charney, would step down and Standard General would nominate three new members, while the company and the shareholder would jointly pick the other two.

Co-chairmen Allan Mayer and David Danziger would continue to lead the board, the company said in a filing with the U.S. Securities and Exchange Commission.

Charney was ousted from the company for alleged misuse of corporate funds and his role in disseminating nude photos of an ex-employee. He is currently under investigation and, as part of the deal, will not be allowed to serve on the board or be chief executive until a committee of independent directors clears him.

He will, however, be entitled to receive his base salary as a consultant to the company, American Apparel said in a filing.

"I'm assuming (Charney will) be back relatively soon, probably as CEO or in some new position," said an American Apparel shareholder who requested anonymity.

Standard General had acquired, in recent weeks, a 43 percent stake in the company from Charney after American Apparel would not negotiate with him following his ouster on June 18.

The $25 million payment from Standard General would be used to repay a $9.9 million loan from Lion Capital.

The deal could herald a period of calm for the company, which was making daily headlines as it raced to repay the Lion Capital loan, which was originally not due until 2018. (Reporting by Jeffrey Dastin and Sneha Banerjee, Sweta Singh in Bangalore; Editing by Bernadette Baum, Joyjeet Das and Steve Orlofsky)

Higher-than-expected loan losses in the shipping sector ate into DNB's second-quarter earnings, sending shares in Norway's largest bank down almost 5 percent on Thursday.

Nordic banks made it through Europe's recent financial crisis relatively unscathed, but have suffered from their exposure to countries in the Baltic region and to a shipping sector which has struggled with overcapacity in recent years.

DNB, one of the world's biggest lenders to the shipping sector, had been seeing a declining trend of souring loans in shipping, but the second quarter saw an unexpected uptick in losses for the sector.

That took the shine off of what analysts said was otherwise a healthy quarter for the bank.

DNB shares traded down 4.6 percent at 110.2 Norwegian crowns by 0851 GMT, underperforming the Oslo market as a whole which was 1.5 percent lower.

The results dragged on DNB's Swedish banking peers which report earnings next week.

Loan losses in the quarter reached 554 million Norwegian crowns ($90 million), higher than 398 million seen in a Reuters poll of banks and brokerages, due in part to lower freight rates in shipping which makes up about 6 percent of its overall lending portfolio.

Still, Karl Storvik, an analyst at Oslo-based brokerage Arctic Securities, said he did not think the increase in collective shipping provisions reflected a change in underlying credit quality, as it was partly due to the way the bank monitored shipping loans.

Nordea, the Nordic region's biggest bank, is also a large lender to the shipping sector and will report earnings next Thursday. Its shares traded down 1.6 percent.

DNB said overall loan losses were on a downward trajectory from a year earlier and it was on schedule to fulfill new capital requirements for Norwegian banks.

"The rise in profits from the second quarter of 2013 reflects higher lending volumes, wider lending spreads, reduced restructuring expenses and lower impairment losses on loans," Chief Executive Rune Bjerke said in a statement.

The bank, the first Nordic lender to report second-quarter results, has had to meet tough new core capital requirements designed to prevent a repeat of a banking collapse in the early 1990s that forced the government to rescue several big lenders.

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It posted a net profit of 4.65 billion crowns ($756 million), lagging the 4.77 billion seen in the Reuters poll, up from 3.80 billion at the same time a year ago.

DNB shares were up 6.5 percent in the six months before Thursday's report, lagging an Oslo benchmark index up 13 percent over the same period.

Sovereign wealth fund Qatar Holding has sold 260.1 million pounds ($442.6 million) worth of shares in London Stock Exchange Group (LSE), a source familiar with the matter said on Thursday, ahead of the LSE's impending $1.6 billion rights issue.

Qatar sold the shares at 1,915 pence each as part of its portfolio management, the source said, adding that Qatar remained a supportive shareholder of the LSE. The disposal leaves Qatar with a stake of around 10.3 percent in the company.

The LSE is planning a rights issue of new stock to help fund its $2.7 billion purchase of U.S. indexes and investment management business Russell Group, the LSE's largest-ever acquisition, which was announced in June.

Qatar could use the money raised to fund the purchase of shares in the rights issue, to which it will be entitled because of its remaining shareholding, a further two sources close to the deal said.

The sale represents around 5 percent of the LSE's outstanding shares.

The price of the accelerated share sale was made at a 2.1 percent discount to Wednesday's closing share price of 1,956 pence. The original price range was set at between 1,845 and 1,925 pence.

Shares in the LSE fell on Thursday and were last trading down 2.1 percent at 1915 pence at 0816 GMT.

Qatar Holding said in a statement it did not expect to dispose of any further LSE shares in the immediate future. The fund's other British holdings include a 5 percent stake in lender Barclays, almost 26 percent of retailer J Sansbury and 1.8 percent of oil firm Shell.

Essa Kazim, chairman of Borse Dubai, the top shareholder in LSE Group with a 20.5 percent stake, told Reuters last month that the organisation was happy with the LSE's performance and had no plans to raise or lower its stake.

Qatar's sale was run by Citi and BoA Merrill Lynch .

($1 = 0.5877 British Pounds) (Reporting by Freya Berry and Clare Hutchison in London, with Andrew Torchia in Dubai; Editing by David Holmes)

Federal Reserve Chair Janet Yellen will go before Congress next week to deliver the U.S. central bank's latest report on monetary policy, congressional officials said on Tuesday.

Yellen will appear before the Senate Banking Committee at 10 a.m. EDT on July 15, the Senate committee said. She is scheduled to appear before the House Financial Services Committee at 10 a.m. the following day, a spokesman for the House committee confirmed.

The Fed chief by law testifies twice a year to the two congressional panels. Her first visit as Fed chair came in February, and turned into a marathon, six-hour affair as lawmakers quizzed the new central bank chief on her plans.

Her appearance next week comes as the Fed is far along in shutting down some of the main stimulus policies it used to combat the recession, and is planning its return to a more normal monetary policy.

That includes an ongoing debate over when to increase interest rates and how to manage the possible reduction in the $4 trillion in assets the central bank accumulated through various bond-buying programs.

It also will come less than a week after the House committee is scheduled to consider legislation to tighten congressional oversight of the central bank and monetary policy.

Argentina said on Tuesday it would meet with a mediator for the second time this week in the country's dispute with "holdout" investors, lifting market hopes for a deal needed to avoid another painful debt default.

With the economy already in recession, President Cristina Fernandez's cash-strapped government has until July 30 to reach an agreement with hedge funds who refused to participate in the country's earlier debt restructuring and have been suing for full repayment of sovereign bonds which Argentina defaulted on in 2002.

On Argentina's local over-the-counter market, benchmark Discount bonds ARDISCD=RASL rose 1.60 percent to 88.65 while Par bonds ARPARD=RASL were up 1.32 percent to 49.90. Traders cited optimism over the talks as the reason for the climb.

Argentina's cabinet chief Jorge Capitanich did not say whether the holdout funds led by Elliott Management Corp and Aurelius Capital Management would participate in Friday's meeting. There was no immediate comment from the funds.

Other holdout investors with over $6 billion worth of unrestructured Argentine debt have started organizing negotiating committees, encouraged by Buenos Aires' stated desire to settle with 100 percent of its creditors.

The government has said that settling with funds led by Elliott would carry the risk of opening Argentina to a slew of suits from other holdouts.

On Monday, Argentina's Economy Minister Axel Kicillof spent four hours discussing the case in New York with the mediator, Daniel Pollack, who was appointed by U.S. District Judge Thomas Griesa to find common ground in the years-long dispute.

"It was agreed to continue this meeting on Friday," Capitanich said. "It has been an intense dialogue."

Kicillof flew back to Buenos Aires on Tuesday and described the session with Pollack as "an important advance".

"We will go back on Friday," Kicillof told reporters.

In the last few months Kiciloff has settled long-standing disputes with the Paris Club of creditor nations and Spanish oil major Repsol ( id="symbol_REP.MC_0">REP.MC) in a bid to lure investors back to Argentina.

But his stance toward the holdouts was anything but conciliatory on Tuesday. "They are trying to extort a sovereign country," he said in a statement on the presidential website.

Without a deal this month, a court ruling by Judge Griesa would prevent the country from making coupon payments to creditors who accepted a large writedown on their debt holdings after 2002. That would put Argentina in default.

PAYMENT IN LIMBO

More than 92 percent of creditors accepted less than 30 cents on the dollar in restructurings worked out in 2005 and 2010. The holdouts shunned those terms and sued for full repayment plus interest, but they say they are willing to negotiate with the government.

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Judge Griesa blocked a June 30 coupon payment that Argentina tried to make on the restructured bonds, triggering the start of a 30-day grace period ending July 30.

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Argentina is being pushed into talks after refusing for years to negotiate with the holdouts, portraying them as "vultures" circling the corpse of the country's 2002 default as most bought the bonds in the secondary market at a discount.

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Fernandez's government says Griesa overstepped his powers by blocking the coupon payment.

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Argentina published a two-page legal notice in the New York Times on Tuesday, saying it "duly deposited the amounts of interest due on the New Debt Securities issued within the framework of the 2005 and 2010 Sovereign Exchange Offers."

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It said that Bank of New York Mellon, the trustee bank, is required to distribute those funds to bondholders, calling BONY Mellon’s failure to do so a "violation of its obligations".

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BONY Mellon had no comment on the legal notices from the government. A source with direct knowledge of the situation said the bank will file a motion to Judge Griesa on Thursday seeking guidance on what it should do with the money.

Mexico's annual inflation rate is seen climbing in June, but policymakers expect the rise to be temporary as the pace of consumer price gains is contained by a sluggish economy.

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Inflation in the 12 months through June MXCPIA=ECI is likely to have come in at 3.78 percent, up from a 3.51 percent annual rate in May, according to a Reuters poll of 20 analysts.

The Mexican central bank unexpectedly slashed its main interest rate by 50 basis points in early June to a record low of 3.00 percent, saying slack in the economy gave it room to lower borrowing costs without fanning inflation.

Policymakers have said they expect temporary factors to drive the annual rate above the central bank's 4 percent limit in the second half of the year, but that the rate should fall back toward 3 percent by early next year.

The Reuters poll showed analysts expect consumer prices to have risen 0.20 percent MXINFL=ECI in June, mostly on an uptick in gasoline prices.

Core inflation, which strips out some volatile food and energy costs, was seen up 0.22 percent MXCPIX=ECI as prices for beer and restaurants rose. Analysts noted the price hikes were likely fueled by businesses raising prices around viewing events for the soccer World Cup.

The national statistics institute will release inflation data at 8 a.m. CDT (9:00 EST) on Wednesday.

A measure of Australian consumer sentiment improved modestly in July as worries about family finances eased, a survey showed on Wednesday, though the depressing impact of an unpopular federal budget continued to linger.

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The survey of 1,200 people by the Melbourne Institute and Westpac Bank ( id="symbol_WBC.AX_0">WBC.AX) showed the index of consumer sentiment rose a seasonally adjusted 1.9 percent in July, from June when it had inched up only 0.2 percent.

The index still has not fully recovered from May's 6.8 percent dive which followed a budget of welfare reforms, cutbacks and increased charges for services.

The index reading of 94.9 for July was down 7.1 percent on the same month last year and means pessimists still exceed optimists.

The survey's measure of sentiment among supporters of the Labor opposition is down 25 percent on a year ago at 83.9. In contrast, the index for supporters of the Liberal National government has risen by 25 percent to stand at 116.1.

The largest improvement in July came in the survey's measure on the outlook for family finances over the next 12 months, which jumped 12.3 percent though from very low levels.

The index of family finances compared to a year ago rose 1.9 percent and that for economic conditions over the next 12 months increased by 3.9 percent.

Consumers remained cautious on the longer-term outlook, however, with the index of economic conditions over the next five years dropping 3.8 percent.

A measure on whether it was a good time to buy a major household item also dipped 2.1 percent.

U.S. Treasury Secretary Jack Lew said on Wednesday that moving to a market-determined exchange rate will be a crucial step for China, as the two countries began annual high-level talks.

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"We support China's efforts to allow the market to play a more decisive role in the economy and rely more on household consumption to drive China's economic growth. Moving to a market-determined exchange rate will be a crucial step," he said.

"We welcome this commitment and China's economic growth. A prosperous China that grows in a way that is consistent with international rules and norms will contribute to the strong, sustainable and balanced growth of the global economy."

China's consumer inflation cooled slightly more than expected in June, pointing to lingering weakness in the economy which could prompt Beijing to launch further stimulus measures to shore up growth.

The consumer price index (CPI) rose 2.3 percent in June from a year earlier, missing the market forecast of 2.4 percent in a Reuters poll and down from 2.5 percent in May, the National Bureau of Statistics said on Wednesday.

The producer price index (PPI) dropped 1.1 percent in its 28th straight month of decline, versus a market consensus for a fall of 1 percent, signalling that demand in the domestic economy remained lukewarm, despite some recent signs of stabilisation.

"The weak inflation data leaves more scope for Beijing to step up use of targeted measures and even opens the opportunity window for blanket easing policy, such as an interest rate cut, to support economic growth," said Wang Jin, an analyst at Guotai Junan Securities in Shanghai.

Most economists believe Beijing will roll out fresh stimulus measures in coming months to ensure 2015 economic growth meets its target of 7.5 percent, but they are divided over whether it will stick to small-scale measures used so far or take more aggressive steps such as interest rate cuts or a nation-wide reduction in the amount of reserves banks must hold.

Policymakers are reluctant to announce a massive stimulus programme like the one adopted during the 2008-09 global financial crisis, which fueled inflationary pressures and left local governments saddled with mountains of debt.

"Subdued inflation means monetary policy will have plenty of room to ease further over the coming months," Julia R Wang, an economist at HSBC said in a note to clients.

"We think the central bank will likely continue to do so in a targeted manner, provided that economic activity continues to show improvement."

Ting Lu, an economist at Bank of America-Merrill Lynch, also expected Beijing to take further action.

"We expect Beijing to continue rolling out a slew of small-scale measures to deliver the around 7.5 percent annual growth target," he said in a note to clients.

The weaker June inflation reading was mainly due to lower pork and vegetable prices.

The CPI fell 0.1 percent in June from May, versus a forecast of no change in monthly prices.

In the first half of this year, average consumer inflation was 2.3 percent, way below the official ceiling of 3.5 percent set by the government at the start of the year.

FURTHER EASING NEEDED

Data for May and more recent factory and service sector activity surveys have suggested that China's economy was steadying after a weak start to the year.

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But analysts said easing consumer inflation and persistent factory-gate deflation showed the recovery remained patchy.

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A cooling property market poses an additional risk, and conditions there could determine just how much more may be needed on the stimulus front to stabilise the broader economy.

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With inflation clearly not a threat for now, the government and central bank have the scope to loosen policies further to bolster the economy.

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"Further monetary policy easing across the board will still be needed to help lift confidence in China's economy," said ANZ economists in a research note to clients.

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ANZ believes Beijing will reduce reserve requirement ratios (RRR) for all of the country's banks in the third quarter. So far, it has relaxed the requirement only for banks which are significant lenders to small companies and the farming sector.

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Chinese Premier Li Keqiang said earlier this week that economic growth quickened in the second quarter from the previous three months. But he added the economy still faces downward pressure and further modest stimulus measures will be needed to boost activity.

The Bank of Japan may slightly cut its economic forecast for the current fiscal year at a quarterly review of its estimates next week, sources familiar with its thinking said, reflecting soft exports and a bigger-than-expected slump in household spending after a sales tax hike in April.

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But the central bank will roughly maintain its upbeat price projections and stick to its view that the world's third-largest economy will continue a moderate recovery as the pain from the tax hike heals, the sources said on condition of anonymity.

With no major change in the broad economic outlook, the BOJ is set to keep monetary settings unchanged at its two-day rate review ending on Tuesday.

In its latest projections made in January, the BOJ expects the economy to expand 1.1 percent in the current business year that began in April, higher than a 0.9 percent rise forecast by analysts in a Reuters poll last month.

The central bank may revise down the forecast slightly after data released late last month showed household spending slumped 8 percent in the year to May, a sign that the tax hike took a heavier toll on consumption than expected in the April-June period.

Many private-sector analysts are expected to further cut their conservative growth projections for the second quarter and the full fiscal year, taking into account the household spending data which is among figures used to calculate gross domestic product (GDP).

The BOJ issues its long-term economic and price projections in a semi-annual outlook report in April and October of each year, and reviews them in January and July. They are all conducted on the day of its policy-setting meetings.

Ukraine expects to receive a second tranche of $1.5 billion from an International Monetary Fund's $17 billion aid package, Prime Minister Arseny Yatseniuk said on Wednesday.

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Yatseniuk said he was expecting to meet later on Wednesday a visiting IMF mission that has been examining Ukraine's economic performance since June 24.

"We believe Ukraine has fulfilled the criteria which are written into our IMF program and we should complete discussions and successfully receive the second tranche," Yatseniuk told a government meeting.

The ex-Soviet republic received a first tranche of slightly more than $3 billion in May.

The Bank of Japan may trim its economic growth forecast for the current year next week, sources familiar with its thinking said, reflecting soft exports and a bigger-than-expected slump in household spending after a sales tax hike in April.

But the central bank will roughly maintain its upbeat price projections and stick to its view that the world's third-largest economy will continue a moderate recovery as the pain from the tax hike heals, the sources said on condition of anonymity.

With no major change in the broad economic outlook, the BOJ is set to maintain its policy framework, under which it has pledged to increase base money by 60-70 trillion yen ($590-$689 billion) per year via aggressive asset purchases. The decision is expected at the end of a two-day meeting on July 15.

"The economic contraction in April-June appears to be bigger than expected, so it won't be surprising if the BOJ cuts its growth projection," said Junko Nishioka, chief Japan economist at RBS Securities.

"But doing so may heighten market expectations of additional monetary easing, which the BOJ wants to avoid. It's tricky."

Japan's economy clocked its fastest pace of growth in more than two years in the first quarter as consumer spending jumped and business investment turned surprisingly strong ahead of the sales tax increase in April to 8 percent from 5 percent.

The BOJ has acknowledged that growth will contract in the second quarter in response to the tax increase, although it has said the downturn will be mild and temporary as companies raise wages and hiring due to brightening economic prospects.

But a bigger-than-expected slump in May household spending has led to a growing market view that the economy may contract more than expected in April-June, which would weigh on growth for the full business year.

In its latest projections made in January, the BOJ expected the economy to expand 1.1 percent in the current business year that began in April, higher than a 0.9 percent rise forecast by analysts in last month's Reuters poll.

The central bank may revise down the forecast slightly, taking into account the slump in household spending and continued weakness in exports.

"There's uncertainty on how much consumption will rebound from the downturn caused by the tax hike," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

Adding to headaches for central bankers, exports have failed to pick up despite the competitive overseas advantage they get from a weak yen, and the outlook remains murky due to sluggish demand in emerging Asian markets.

Some BOJ officials also fret that household spending may not rebound as strongly as expected in July-September, as sales of big-ticket items like cars and houses -- which saw a rush in demand ahead of the tax hike -- show little signs of recovery.

The BOJ, however, is likely to maintain its assessment that the economy continues to recover moderately, encouraged by signs companies are finally ramping up capital expenditure and raising wages instead of hoarding on their huge pile of cash.

In its quarterly review of estimates next week, the central bank is seen roughly maintaining its economic growth projection of 1.5 percent for the next business year to March 2016, and 1.3 percent for the following year.

It is also likely to stick to its projection that consumer inflation will accelerate to 1.9 percent in fiscal 2015 and 2.1 percent in fiscal 2016, from 1.3 percent in the current business year.

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The BOJ issues its long-term economic and price projections in a semi-annual outlook report in April and October of each year, and reviews them in January and July. They are all conducted on the day of its policy-setting meetings.

After weeks of political wrangling, Chile's Finance Minister unveiled changes to a tax reform bill late on Tuesday, including a larger increase in the corporate tax rate in exchange for concessions opposition lawmakers called for.

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The reform, a centerpiece of President Michelle Bachelet's administration, maintained an overall goal of increasing tax revenue by $8.2 billion, equivalent to 3 percent of gross domestic product.

Corporate taxes will now gradually increase to 27 percent by 2017 from a current 20 percent, according to the agreement between the minister and the Senate's five-member Finance Committee. In the bill as initially presented to Congress, corporate taxes were to increase to 25 percent.

"We've reached a historic agreement ... we've managed to move forward on the most complex and profound tax reform in the last 30 years," said Finance Minister Alberto Arenas from Congress in the port city of Valparaiso.

With the tax reform "growth will go hand in hand with inclusive development, and companies and individuals will be taxed in a more balanced way," said Arenas.

The funds raised through the uptick in the tax take will go towards financing an education overhaul, improvements to Chile's health system and helping the country balance its books.

Bachelet took office for a second non-consecutive term in March, vowing to address Chile's rampant income inequality, the worst among the Organization for Economic Co-operation and Development's 34 member states.

Last week, Arenas said that the government's target of reducing the fiscal structural deficit to zero by 2018 was conditional on the approval and implementation of the tax reform package.

Plans to scrap the so-called 'FUT', a mechanism by which companies can gain tax exemptions on part of their profits, remained intact after the agreement.

Businesses and opposition lawmakers have said the move to eliminate the FUT could stem investment in an economy that is already stalling, and especially hurt companies that have scant access to international credit markets.

The new changes to the tax bill also include incentives for investment and saving.

"The system will allow medium and large companies to reinvest part of their profits," said Senator Ricardo Lagos Weber, who heads the Senate Finance Committee.

The government expects the tax reform to receive final approval from Congress within the next couple of months.

(Reporting by Antonio de la Jara and Anthony Esposito; Writing by Anthony Esposito; Editing by Christopher Cushing, John Stonestreet)

The Federal Reserve has begun detailing how it plans to ease the U.S. economy out of an era of loose monetary policy, indicating it will end its asset purchases in October and appearing near agreement on a plan to manage interest rates in the future, according to minutes of the last Fed policy meeting.

The minutes from the June 17-18 meeting indicate the Fed envisions using overnight repurchase agreements in tandem with the interest it pays banks on excess reserves to set a ceiling and floor for its target interest rate.

Though no decisions have been announced, the discussion has become detailed enough for Fed officials to contemplate the proper spread between the two - mentioned in the minutes as 20 basis points.

The minutes showed the Fed participants also "generally agreed" that monthly bond purchases would end in October, with a final reduction of $15 billion in monthly purchases of U.S. Treasuries and mortgage-backed securities.

Analysts found little in the minutes to suggest the Fed will move forward its first interest rate increase, currently expected in the middle of next year.

But there was ample discussion about how the central bank should exit from policies put in place to fight the 2007-2009 financial crisis.

According to the minutes, there continues to be division over when the Fed should stop reinvesting proceeds of the $4.2 trillion in assets it purchased to support financial markets.

Ending reinvestment will put the central bank's balance sheet on a declining path, and some members argue that should not take place until interest rates have been increased.

In addition, the minutes indicated the reinvestment decision may not be an all-or-nothing choice: the central bank may try to "smooth the decline in the balance sheet," perhaps by letting some maturities expire each month and reinvesting the proceeds of others.

The Fed’s exit strategy is complicated because its stimulus programs flooded the financial system with $2.6 trillion that has ended up back at the Fed as excess bank reserves. With that much money on hand, banks have little need to borrow from each other in the federal funds market - stifling an important interest rate tool.

The New York branch of the U.S. central bank has been testing the reverse repo facility since September as a way to help control short-term interest rates, and has seen strong demand from money market funds and other bidders. In reverse repos, the Fed borrows funds overnight from banks, large money market mutual funds and others. The tool is designed to mop up excess cash in the financial system which could keep market rates too low if left in circulation.

(Reporting by Howard Schneider; Additional reporting by Richard Leong in New York; Editing by Paul Simao)

Malaysia's CIMB Group Holdings Bhd is seeking to acquire two lenders to create the country's biggest bank, a source familiar with the deal said, a move that is likely to push larger rival Maybank and others in the region to bulk up too.

CIMB, the nation's second-largest bank, is likely to offer an all-stock deal to buy RHB Capital Bhd and Malaysia Building Society Bhd although details have yet to be hammered out, the source said. The source declined to be identified as the matter was not yet public.

Shares in all three banks were halted pending the release of a material announcement.

The proposal comes ahead of a planned partial integration of Southeast Asian economies that is due to begin by the end of next year, with countries in the 10-nation alliance keen to build national champions to bolster their banking systems.

CIMB has been the most acquisitive of Malaysia's banks and a deal would be the last major move by CEO Nazir Razak, brother to the prime minister, before he relinquishes the helm in September after 15 years.

A successful deal would see CIMB's assets climb to 614 billion ringgit ($195 billion), 6 percent bigger than Malayan Banking Bhd (Maybank) and could help with pricing power in an intensely competitive domestic market.

But some analysts warned it may pay too much and that there could be too much overlap between CIMB and RHB - the nation's No. 4 bank, as they have similar portfolio mixes and strengths.

RHB and Malaysia Building Society have a combined market capitalization of around $9 billion, almost half of CIMB's $19 billion market value.

"We opine that such a merger could be value destructive to the merged entity given the degree of operational and revenue duplications between CIMB and RHB Capital," brokerage UOB KayHian said in a client note.

Representatives for CIMB did not respond to requests for comment while RHB said there was no further update at this stage. Representatives for Malaysia Building Society were not immediately available for comment.

PRESSURE ON MAYBANK

The Edge newspaper said all three banks had submitted an application on Wednesday to the central bank to begin talks and that approval was expected as soon as Thursday.

A deal would make CIMB ASEAN's fourth-largest bank after Singapore's three biggest lenders. By comparison, the largest, DBS Group Holdings, has assets of $337 billion.

Nazir is the architect of the bank's expansion over the past decade that saw it buy domestic rival Southern Bank, the Asia equities and investment banking business of RBS as well as lenders in Indonesia and Thailand.

A new deal is bound to heap pressure on Maybank to acquire a rival too, analysts said, with some speculating that Public Bank Bhd could fall within its sights.

"Maybank might want to take over Public Bank, which compared to RHB Capital, is much better in terms of asset quality, and is well-managed and well-capitalised. This makes Public Bank a vulnerable target," said Ei Leen Tan, an analyst with Affin Investment.

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A key player in any acquisition by CIMB of its two smaller rivals will be the Malaysian state pension fund, the Employees Provident Fund (EPF). It owns 41.3 percent of RHB and 65 percent of Malaysia Building Society. The fund also owns a 14.5 percent stake in CIMB, according to Thomson Reuters data.

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Another will be Abu Dhabi-based Aabar Investment which bought a 25 percent stake in RHB for 10.80 ringgit per share in 2011 - regarded as a particularly high valuation. Both CIMB and Maybank walked away from a deal to buy RHB in 2011 after failing to secure support from Aabar. The state fund currently owns nearly 22 percent of RHB.

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The EPF said in an email it would not be able to comment on the matter as it is very preliminary in nature and specific details are still pending. A spokesman for Aabar said it doesn't comment on any of its investments.

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While plans for ASEAN integration are widely expected to suffer delays, bankers and analysts expect more deals done as the banks from Singapore, Malaysia and Indonesia prepare for a more competitive landscape.

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"This will give impetus to other countries in the region to think of something similar," said a M&A banker who advises on bank deals.

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($1 = 3.1705 Malaysian Ringgits)

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(Additional reporting by Saeed Azhar in Singapore, Trinna Leong in Kuala Lumpur and David French in Dubai; Writing by Denny Thomas; Editing by Edwina Gibbs)

German retailer Metro is not interested in bringing together its Kaufhof department stores with the struggling Karstadt chain, its chief executive said.

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"Karstadt is still absolutely not an issue for us," Metro Chief Executive Olaf Koch told journalists at an event late on Wednesday.

Speculation has long swirled about a possible merger between the two former giants of German retail and flared up again this week after the chief executive of loss-making Karstadt stepped down after only five months in the job, hinting at a lack of support from the firm's billionaire owner.

Karstadt was rescued from insolvency in 2010 by Nicolas Berggruen, but unions have accused him of not investing enough in the chain, allowing Kaufhof to take market share.

Department stores around the world have faced difficulties in recent years due to competition from e-commerce players like Amazon, prompting suggestions Kaufhof could buy Karstadt or a third party investor could buy and merge both chains.

While Metro has long said it would be prepared to sell Kaufhof for a fair price as it focuses on developing its cash-and-carry and consumer electronics businesses, Koch said he was under no pressure to sell Kaufhof as it was profitable.

"Kaufhof has great perspectives. We see growth, we see a need to modernize. We will continue to invest," he said, adding that Metro would consider any reasonable offers for the business but there were currently none under consideration.

Kaufhof, which is celebrating its 135th anniversary this year, saw sales fall 0.4 percent in the first half of Metro's fiscal 2013/14 year to 1.68 billion euros ($2.29 billion).

Struggling British baby products retailer Mothercare, fighting off a takeover bid from U.S. group Destination Maternity, named its interim chief executive as its permanent CEO on Thursday.

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Mark Newton-Jones, who led online retailer Shop Direct for almost a decade, took over as interim boss in March, replacing Simon Calver who quit in February after a profit warning showed his plans to revive the group were faltering.

Newton-Jones will take up his place on the Mothercare board on 17 July.

"I am very much looking forward to leading the Mothercare group at such an important time in its development," he said.

"We now need to put in place the building blocks to strengthen the UK performance and I believe there is then a tremendous opportunity to take this business forward."

Destination Maternity has had two bid proposals for the British group rejected.

A planned merger of the Dubai Financial Market and the Abu Dhabi Securities Exchange (ADX) has been shelved for the foreseeable future as terms for the politically sensitive move could not be agreed, sources told Reuters on Thursday.

Having been mooted for a number of years, a merger of the DFM and the ADX seemed to take an important step closer last year as investment banks were hired to advise on a tie-up - a move revealed by Reuters last October.

The state-backed deal, seen as one of the biggest changes in the country's financial industry in recent years, was expected to energize financial markets in the United Arab Emirates, making it easier for investors to operate across the markets, stimulating trade and attracting more foreign investment.

However, despite a number of key impediments being overcome since then, talks have stalled and a deal is now unlikely to happen any time soon.

"It's been shelved," said one Abu Dhabi-based banking source aware of the matter, adding that reaching an agreement was always going to be tricky given multiple points of contention, such as valuations, the location of the merged entity's headquarters, and the board's composition.

A spokesman for the Abu Dhabi Executive Council, the top policymaking body in the emirate which mandated Abu Dhabi's advisers, did not respond to calls and an email seeking comment. Spokesmen for the ADX and DFM declined to comment.

The sources, who all spoke on condition of anonymity as the information isn't public, said it was unclear whether the merger plans were permanently on hold or whether they would be revived later.

The valuation of the DFM, the Gulf's only listed bourse, has increased significantly since the advisers were first appointed, as trading increased during a bull run which saw the value of Dubai's benchmark index jump 59.5 percent between Jan. 1 and May 6.

Based on a valuation of around 20 times earnings before interest, tax, depreciation and amortization (EBITDA) used under the merger plan, DFM's value rose from around 2 billion dirhams ($545 million) at the end of last September to 4.64 billion dirhams at the end of March.

The merger plan valuation, conducted by Goldman Sachs, according to two of the sources, put ADX at about 10-12 times EBITDA.

"They are engaged, the marriage would be good but the dowry is the problem – Dubai is expensive," said Mohammed Ali Yasin, head of National Bank of Abu Dhabi's brokerage subsidiary.

POLITICS VS ECONOMICS

Political considerations were always a big obstacle to be overcome, as they are in many mergers in the Gulf Arab region. Despite economic pressures for consolidation in a number of industries, powerful shareholders are often reluctant to cede control in their businesses and be seen to be losing face - in this case, both emirates wanted the prestige of running their own bourses.

But the appointment of advisers for a stock market tie-up, as well as the merging of Abu Dhabi and Dubai's separate aluminum businesses into Emirates Global Aluminum last year, raised hopes of a new era of cooperation.

In April this year, a top Dubai economic policymaker said that an agreement to merge the two markets had been reached in principle but was yet to be finalised.

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But the impetus at a political level has seemingly waned.

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"For the moment it is on hold. The decision makers are waiting for a better time and to make a thorough assessment on some key issues," a second source familiar with the matter said, without elaborating on what the key issues were.

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Analysts are optimistic the merger will eventually happen.

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"It should not hinge on valuations, profit or loss and such things. It is a matter of national strategy and national economic interests," said Wadah al-Taha, chief investment officer at Dubai-based Al Zarooni Group.

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"It will happen, if not now, later. It will be politically driven and forced to happen."

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Abu Dhabi, the richest emirate in the UAE, had hired U.S. investment bank J.P. Morgan Chase and local lender First Gulf Bank to advise on the merger.

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Investment Corporation of Dubai, the flagship holding company which owns stakes in many of Dubai's top entities, including DFM's parent, Borse Dubai, had hired Citigroup.

The decision came in the face of speculation among bond traders that remarks by the finance minister-nominee asserting an urgent need to boost domestic consumption was a veiled demand for the Bank of Korea to cut interest rates.

The Bank of Korea's monetary policy committee left its base rate unchanged at 2.50 percent, a media official said without elaborating. Governor Lee Ju-yeol is due to hold a news conference from 11:20 a.m. (0220 GMT)

All but two of the 26 analysts surveyed by Reuters late on Tuesday forecast the Bank of Korea would leave its base rate unchanged at 2.50 percent at Thursday's meeting.

Separately, the Bank of Korea is due to release revised economic growth forecasts for 2014 and 2015 later in the day. Its previous forecasts were for Asia's fourth-largest economy to grow 4.0 percent this year and 4.2 percent next year.

Private-sector economists have been downgrading their growth views for South Korea, although by small margins, after indicators showed domestic demand was softening and exports were recovering at a much slower pace than expected. (Reporting by Christine Kim and Choonsik Yoo; Editing by Eric Meijer)

The following corporate finance-related stories were reported by media:

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* German lender Commerzbank AG is expected to pay between $600 million and $800 million to resolve investigations into its dealings with Iran and other countries under U.S. sanctions, sources familiar with the matter said.

For the deals of the day click on

For the Morning News Call-EMEA newsletter click on (Compiled by Aastha Agnihotri in Bangalore)

The following are the top stories in the Wall Street Journal. Reuters has not verified these stories and does not vouch for their accuracy.

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* Federal Reserve officials agreed at June's policy meeting to end their bond-buying program in October, putting an explicit end date on the experiment for the first time. Most officials at the June meeting also indicated that they expect an interest rate hike to come next year. (on.wsj.com/VLc1vo)

* IBM on Wednesday pledged to spend $3 billion over five years on semiconductor research. The money will be directed toward two major tasks: tackling technical obstacles to the miniaturization of circuitry on conventional silicon chips and developing alternative materials and technologies to keep boosting computing speed while consuming less energy. (on.wsj.com/1nffCfJ)

* The Education Department says it was unaware of the dire state of Corinthian Colleges Inc's finances before it moved June 12 to restrict access to federal student-aid dollars, which made up 80 percent of Corinthian's revenue. The aid freeze was designed to pressure the company to comply with an investigation into recruiting tactics, administration officials say, not to force its closure. (on.wsj.com/1szTnRZ)

* Chinese exports grew in June on the back of strengthening U.S. consumer demand, in a positive sign for China's crucial factory sector and for the global outlook. The pace of export growth disappointed some economists, though others blamed the lingering impact of distortions in last year's Chinese trade numbers used to make the comparison. (on.wsj.com/1ra3L2H)

* European Union antitrust officials have started questioning rival firms about Facebook Inc's proposed $19 billion acquisition of messaging service WhatsApp, ahead of a formal review that could be a test case for how to apply EU competition law to the new world of social media. (on.wsj.com/1n7ifLz)

* U.S. regulators are poised to complete long-awaited rules intended to prevent a repeat of the investor stampede out of money-market mutual funds that threatened to freeze corporate lending during the 2008 financial crisis. The Securities and Exchange Commission is expected to vote on a plan as early as this month that would require certain money funds catering to large, institutional investors to abandon their fixed $1 share price and float in value like other mutual funds, these people said. (on.wsj.com/1ol2KkG) (Compiled by Sudarshan Varadhan in Bangalore)

Miro Cerar may be a newcomer to politics, but he is already a household name to the 2 million people of Slovenia, the euro zone state whose fragile economy he will have to nurture if he wins an election on Sunday.

The son of one of his country's greatest sportsmen is front runner to become prime minister and take on the task of dragging Slovenia, once seen as a model for post-Communist prosperity, out of financial crisis and economic malaise.

Slovenia narrowly avoided having to seek an international bailout for its banks late last year.

Sunday's parliamentary election is rattling investors' nerves again, this time over the fate of measures the outgoing government agreed with its EU partners to steady Slovenia's finances and remake an economy roughly 50-percent controlled by the state.

A bespectacled law professor and adviser to parliament, Cerar, 50, takes his celebrity from his father Miroslav Cerar, a two-time Olympic pommel horse champion in the 1960s when Slovenia was part of socialist Yugoslavia.

His late mother was a politician, state prosecutor and justice minister.

Cerar formed his party - the Party of Miro Cerar - just five weeks ago. He has already shot to the top of opinion polls, testimony to the trust that traditional parties have squandered as Slovenia's crisis exposed an ingrained culture of politically-connected lending and mismanagement.

Cerar supports liberalising the economy and labour market rules, cutting red tape and selling off smaller state firms. But he has come out against the major slated sales of Slovenia's telecoms operator and international airport.

"I'm entering politics because I know that the situation in Slovenia is so bad that ... we need new people, new ideas, new practices," he told Reuters last week.

Cerar has offered few details, however. While his lukewarm embrace of privatisation might endear him to many traditionally leftist Slovenians, it will worry investors and Brussels.

Analysts see Cerar's centre-left SMC party entering coalition government with the Social Democrats (SD) and the Desus pensioners' party. Both were junior partners in the outgoing coalition, when the SD in particular barely disguised its distaste for privatisation and public sector spending cuts.

TWIST OF FATE

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"Cerar leads in opinion polls because he is not tainted with corruption and has credibility," said Borut Hocevar, an analyst at the Slovenian daily Finance.

"However, privatisation will slow under his rule and will probably only happen because Brussels will insist on it."

When Slovenia joined the euro zone in 2007, it was the bloc's fastest growing economy. But the collapse of its export sector with the onset of the global crisis exposed the rot, and the outgoing government of Alenka Bratusek had to pour 3.3 billion euros ($4.5 billion) into local banks to keep them afloat.

Cerar's late mother, Zdenka, was once deputy leader of the Liberal Democrats, which ruled Slovenia for more than a decade until 2004, when Slovenia became the first ex-Yugoslav republic to join the European Union.

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The Liberal Democrats, like other parties in power before and after, kept foreign investors at bay. Cerar, however, rejects any comparison with his own politics.

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"I have the same basic values as my mother, that politicians must be honest, fight for their values and work for the benefit of Slovenia," he said. "But my professional and political career is entirely independent."

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That he is challenging at all owes everything to a twist of fate in 1981, when Cerar's parents cancelled a family trip to Corsica because Miro's baby sister had fallen ill. The plane crashed into Corsica's San Pietro mountain, killing all 180 people on board.

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"When we heard about the crash we had the feeling we had been reborn, that it was not yet time for us to go. Every day I'm grateful for that," Cerar said.

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His party is scoring as much as 38 percent in some polls, but he will have to marshal disparate allies. Politicking toppled Bratusek's government and forced Sunday's early election. ($1 = 0.7331 Euros) (Editing by Matt Robinson/Ruth Pitchford)

Greek yields dipped on Thursday as the aid recipient readied an issue of three-year bonds in its second debt sale since its default, taking advantage of a European Central Bank promise to make long-term loans to banks.

The sale is expected to raise 3 billion euros and follows a five-year bond sale in April, which marked one of the fastest market comebacks by a sovereign following a debt restructuring.

It is also signalling Greece's gradual emergence from a debt crisis that started in 2010 and spread to other countries in the euro zone at its peak in 2011 and 2012, when Athens imposed heavy losses on private bondholders.

Although Greece is expected to come out of a six-year recession in 2014 and is running a budget surplus excluding interest rate payments, the renewed interest for its bonds has a more powerful force behind it.

The ECB's ultra-easy monetary policy has pinned yields on top-rated bonds at record lows and pushed investors towards riskier assets to maximise returns.

The central bank's latest plans to offer up to 1 trillion euros to banks in four-year loans at a rate of 0.25 percent from September makes high-yielding short-term debt particularly attractive. Banks can buy such debt with the ECB money and benefit from the rate differential.

"The new issue should see plenty of demand, and order books could easily rise to double digits," said Jan von Gerich, chief fixed income strategist at Nordea in Helsinki.

Greek 10-year yields fell 2 basis points to 6.09 percent, while five-year yields were flat at 4.25 percent. Both yields have risen in recent days as investors made room in their books for the new paper.

The initial guidance sees the bond yielding between 3.50 and 3.625 percent. Commerzbank strategists said the bond could eventually be sold for as little as 3.25 percent.

That was still higher than yields on all 10-year euro zone bonds apart from Portugal's and Slovenia's. Investors in Italian debt, for example, would have to buy a 15-year bond to get a higher yield than Greece's three-year paper. German 30-year paper offered 2.16 percent.

Greece sold its five-year bond at 4.95 percent and the strong performance in the market following its issuance was another incentive for investors to snap up the three-year paper.

"It looks like a free lunch," one trader said.

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CAVEAT

The new bond comes with a caveat. One of the most attractive features of Greek debt before this sale was that the country had no debt to pay back for the next five years, hence no near-term financing risk.

In the next three years, Greece would have to decide which path to take after the end of its second bailout deal with the International Monetary Fund and the European Union. It will also have to hold elections in 2016, or earlier if the fragile ruling coalition loses even more strength.

Anti-bailout leftist party Syriza did well in the May European Parliament elections and is expected to retain its support from a population deeply hurt by austerity. Bondholders prefer the predictability of a pro-bailout government.

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"Of course the markets are looking at the redemption profile and at some point this could become an issue," said Rainer Guntermann, rate strategist at Commerzbank.

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"But for now, yield levels in these smaller peripheral countries like Greece look attractive and you don't have many alternatives." (Reporting by Marius Zaharia, editing by John Stonestreet)

Russian Industry Minister Denis Manturov said on Thursday he supported returning indebted miner Mechel to financial health within the framework of bankruptcy law or by creating a managing company, RIA Novosti news agency reported.

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On Wednesday state-owned development bank Vnesheconombank (VEB) said it would not take part in a bailout of Mechel, extinguishing hopes for a convertible bond scheme that was seen as its most likely lifeline.

Greek bond yields extended their rise on Thursday with traders citing investor disappointment with initial demand for a new three-year bond Athens is selling via a syndicate of banks.

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Order books for the bond have topped 3 billion euros, according to IFR, a Thomson Reuters service. When Greece sold a five-year bond back in April orders reached over 20 billion euros.

Bailed-out Greece is aiming to raise up to 3 billion euros from the new bond, its second bond sale after it defaulted in 2012.

Greek 10-year bond yields were up 14 basis points on the day to 6.25 percent, underperforming the rest of the euro zone debt market.

Yields on bonds issued by peer Portugal were up 13 bps at 3.94 percent, remaining under pressure amid concern over a proposed debt restrcturing by a holding company of the founding family of Banco Espirito Santo (BES), the country's largest listed bank. (Reporting by Emelia Sithole-Matarise and Marius Zaharia; Editing by John Geddie)

Harbinger Capital Partners has sued Dish Network Corp and its chairman, Charles Ergen, for at least $1.5 billion, accusing them of trying to strip the hedge fund of its control of bankrupt wireless company LightSquared.

The lawsuit, filed in a Colorado federal court on Tuesday, said Ergen had engaged in fraud and violated a federal anti-racketeering law.

LightSquared LP filed for bankruptcy protection in 2012. Its Chapter 11 case has been marred by a long-running battle between Ergen, who became LightSquared's largest creditor during the bankruptcy, and Phil Falcone's Harbinger, which spent billions of dollars building the company's wireless network.

Dish and Ergen engaged in "an illegal scheme involving mail and wire fraud, bankruptcy fraud, tortious interference, and abuse of process," said the complaint. "Defendants wrongfully and deceptively created chaos in the bankruptcy proceedings so that Harbinger would lose control of the LightSquared board."

Harbinger had hoped for a bankruptcy restructuring that would allow it to retain control of LightSquared. But Ergen slowly accumulated about $1 billion of LightSquared's senior loan debt, potentially giving him veto power over any plan.

Last month, LightSquared reached a mediated deal to end its bankruptcy, giving JPMorgan Chase & Co, Cerberus Capital Management LP and Fortress Investment Group LLC control of the company. Harbinger would retain a 12.5 percent stake in LightSquared, and Ergen would be repaid.

Ergen's lawyer last week told the U.S. Bankruptcy Court in Manhattan that Ergen was prepared to fight that plan.

Ergen's lawyer and a Dish spokeswoman did not immediately return a call seeking comment on Wednesday.

The lawsuit was filed in Colorado federal court because it had jurisdiction over claims brought under the federal Racketeering Influenced and Corrupt Organization Act, according to the complaint. Dish is based in Englewood, Colorado.

Also named as defendants in Tuesday's complaint were Ergen's investment funds, Stephen Ketchum and Ketchum's Sound Point Capital Management. The lawsuit says they helped Ergen acquire LightSquared debt.

Hansa Group, a German supplier of chemicals for detergents and body care products, said on Wednesday it had filed for insolvency under its own management, after having reviewed future restructuring options.

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The company added it expects that the insolvency court "will act very quickly to appoint a provisional administrator". (Reporting by Christoph Steitz, editing by David Evans)

Texas power company Energy Future Holdings has postponed indefinitely court hearings aimed at keeping its fast-track bankruptcy on course after a judge questioned the company's approach.

The company said in a filing on Tuesday that it was postponing hearings scheduled for Thursday and Friday at which it was hoping to win approval to borrow $1.9 billion to help finance its plan to exit bankruptcy early next year.

In April, Energy Future Holdings filed one of the largest U.S. bankruptcies with a plan to split the company in a bid to restructure more than $40 billion in debt.

The company also postponed a July 18 hearing when it hoped for approval of an RSA, or restructuring support agreement, which would commit the company and certain creditors to a schedule and a restructuring outline.

The company said it would use the time to discuss potentially beneficial developments with creditors and outside parties. It also said it would consider July 1 comments from U.S. Bankruptcy Judge Christopher Sontchi in Wilmington, Delaware, who questioned if the company was on the "appropriate path."

Energy Future planned to use the $1.9 billion loan, known as a debtor-in-possession or DIP loan, to refinance high-yielding debt of EFIH, its unit that owns Oncor, a regulated power transmission business.

Instead of repaying that loan, the unsecured creditors and their backers who were funding the loan would convert the financing into a stake of about 60 percent in Energy Future when it exited bankruptcy.

"This is clearly not your run of the mill DIP and there's evidence there are serious competing proposals," Sontchi said at the close of the July 1 hearing. He also questioned if the company should be seeking approval of the loan before getting approval of the restructuring support agreement.

"So I think candor requires that I convey that the debtors' record on these particular issues is fairly thin and is going to need more evidence to satisfy the court that this is the appropriate path to continue to go down," he said, according to a court transcript.

Hearings to approve that loan were held on June 30 and July 1, and were set to conclude this week.

Two groups of creditors wanted the company to consider their competing loans, one of which was backed with a $1.6 billion commitment by NextEra Energy Inc, a Florida power company.

Energy Future said in Tuesday's filing it would update the court on July 18.

Separate from its plan to refinance EFIH debt, Energy Future plans to turnover to senior creditors, who are owed $24.4 billion, its unit that owns unregulated power plants and a retail utility.

The Detroit Institute of Arts collection may be worth as much as $4.6 billion, but a sale of art works would raise less than $2 billion to pay the bankrupt city's creditors, according to a report released on Wednesday.

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Michael Plummer, an art expert hired by the institute and the city to evaluate the collection and ways to raise cash from it, concluded that litigation and market conditions would depress prices. Liquidating the most valuable works would eventually force the museum to close, in his opinion.

"Rather than being a source of cash to creditors or a burden on the current city, in fact, the DIA is the single most important cultural asset the city currently owns for rebuilding the vitality of the city," Plummer reported.

Some of Detroit's hold-out creditors have been pushing the city to sell or monetize art works to increase settlement payments in the city's plan to adjust $18 billion of debt and exit the biggest municipal bankruptcy in U.S. history.

"The report makes it abundantly clear that selling art to settle debt will not generate the kind of revenue the city's creditors claim it will," said Bill Nowling, spokesman for Detroit Emergency Manager Kevyn Orr.

A spokesman for one of those creditors, bond insurer Financial Guaranty Insurance Co, declined to comment.

Plummer, principal of Artvest Partners LLC, which was paid $112,500 to produce the report, estimated the collection's value at $2.76 billion on the low end, $3.68 billion in the mid-range and $4.6 billion on the high end.

A sale using the mid-range estimate would fetch as much as $1.8 billion or as little as $1.14 billion.

The collection includes "The Wedding Dance" by 16th century painter Pieter Bruegel the Elder as well as works by Vincent van Gogh and Rembrandt.

Under the so-called grand bargain in Detroit's debt plan, $366 million pledged by the DIA and philanthropic foundations and $195 million from the state of Michigan would be tapped to ease pension cuts for city retirees and prevent the sale of DIA works.

Artvest Partners' report warned that likely lawsuits from Michigan Attorney General Bill Schuette, who has maintained the collection cannot be sold under state law, art donors and others would take years to resolve.

The art expert also said options to monetize the collection, including its use as collateral for a loan, were impractical.

Plummer's report follows an appraisal by auction house Christie's in December that estimated the fair market value of about 5 percent of the DIA's collection at $454 million to $867 million. While the new report was more extensive, Plummer noted that a full assessment or cataloguing of the collection would require at least 18 months.

A federal judge overseeing Detroit's historic bankruptcy has scheduled an Aug. 14 start date for a hearing on the fairness and feasibility of the debt adjustment plan.

Late on Tuesday, bankruptcy court mediators announced an agreement between the city and its hold-out police union "on important core economic terms that will become part of a multi-year collective bargaining agreement." As part of the deal, the union urged its members to vote in favor of Detroit's debt plan just days before Friday's deadline for the return of creditors' ballots.

A federal judge on Wednesday rejected PricewaterhouseCoopers' request to dismiss a $1 billion lawsuit accusing the auditor of providing bad accounting advice that contributed to the October 2011 collapse of MF Global Holdings Ltd, a brokerage run by former New Jersey Governor Jon Corzine.

U.S. District Judge Victor Marrero rejected PwC's argument that the MF Global's bankruptcy plan administrator, which brought the lawsuit, "stands in the shoes" of the company under the "in pari delicto" legal doctrine, and cannot recover because Corzine and other officials were also to blame for the collapse.

Marrero has yet to review other PwC arguments for dismissal, including that the administrator had no authority to sue and did not show that the accounting advice was a "proximate" cause of MF Global's bankruptcy.

A PwC spokesman had no immediate comment. The auditor's lawyer did not immediately respond to a request for comment.

The March 28 lawsuit accused PwC of professional malpractice for providing "flatly erroneous" advice on how to account for Corzine's $6.3 billion investment in European sovereign debt.

Marrero said that while MF Global may have provided information used to formulate that advice, the complaint did not suggest it had an "active, voluntary" role in the advice or was a "willing participant" in unlawful conduct related to it.

"Under PwC's reasoning, the in pari delicto doctrine would insulate an auditor from liability whenever a company pursues a failed investment strategy after receiving wrongful advice from an accountant," Marrero wrote. "Such a broad reading of the doctrine would effectively put an end to all professional malpractice actions against accountants."

Prior to its Oct. 31, 2011 bankruptcy, MF Global had struggled with worries about the sovereign debt, margin calls, credit rating downgrades, and news that money from customer accounts was used to cover liquidity shortfalls.

Corzine is also a former Goldman Sachs co-chairman. He is not a defendant in the PwC case but faces other lawsuits over MF Global from investors, customers and U.S. regulators.

The case is MF Global Holdings Ltd as Plan Administrator v. PricewaterhouseCoopers LLP, U.S. District Court, Southern District of New York, No. 14-02197. (Reporting by Jonathan Stempel in New York)